Alphabetical Company (ALP) prefers variable to fixed-rate debt. On the other hand, Microsotical Company (MIC) prefers fixed-to variable-rate deht. Assume the following information for both Companics: Fixed-Rate Bond Variable Rate Bond ALP 12% LIBOR + 2% MIC 13.5% LIBOR + 2.5% As a rising star analyst in the ALI, you approach the Chief Financial Olliver (CFO) and propose an interest swap deal that your firm can enter into with MIC. IIowever your CFO argues that an interest rate swap will probably not be advantageous to the company because it can issue both lixed and variable debl at more attractive rates than MIC- (5 marks) A) Explain to your CFO why he is wrong. Make sure that your explanation includes the discussion about the absolute and comparative advantages and the potential savings from the interest rate swap deal? B) Now show your CFO the interest rate swap deal by completing the diagram below (Trile your answers in the answer booklet provided) with the following assumptions: (10 marks) ALP will have 50% of the potential savings, and MIC will receive the rest. There is no swap bank. LIBOR (floating rate) must be used in the transaction between ALP and MIC companics i.c.cither transaction (iii) or (iv), ALP MIC (iv) Borrows Borrows 0. (ii)